Information Notice : December 2004

About this Notice

On December 13, 2004, Regulation 391/04 that amends Regulation 1013, made under the Retail Sales Tax Act (Act) was filed.

The regulation imposes new rules for the retail sales tax treatment of asset transfers between related parties and between partnerships and their partners. A draft regulation, containing these rules, was released by the Ontario Ministry of Finance on July 20, 2004 for comment.

This notice identifies the technical amendments that were made to the draft regulation in response to the submissions received. The March 2001 Retail Sales Tax Branch's Information Guide #210 is being updated to explain how RST applies to these asset transfers.

As stated at the time of the release of the draft regulation, the effective date of these amendments is July 20, 2004.

What Changed?

With the following exceptions, the amendments to Regulation 1013 incorporate the rules included in the draft regulation released July 20, 2004.

Grandfathering of Transactions Entered into Before July 20, 2004.

A grandfathering rule has been added to the regulated provisions that would permit transactions, entered into in writing before July 20, 2004, for eligible property, to comply with the previous rules.

The rule allows taxpayers, who had written agreements for the sale of a tax-paid asset with a related party or partner, entered into before July 20, 2004, the option of using the pre-July 20, 2004 rules or the post-July 20, 2004 rules.

The grandfathering provisions are contained in subsections 13(8) and (9) and will also be effective July 20, 2004.

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Technical Changes

The following changes were made to the draft regulation to provide clarity and consistency in the proposed amendments:

  • removing references to beneficial interest or ownership and substituting the requirement for continuous ownership

  • rewording of subsection 13(4) for clarity

  • removing references to the purchase of tangible personal property

  • for the purposes of the equation in subsections 13.3(2) and 13.4, "D" and "F" respectively, have been modified to include a reference to shares that are owned "directly or indirectly" by the purchaser

  • for the purposes of the equation in subsections 13.6(2) and (3), the definition of "A" has been modified to refer to "fair value" of eligible property, and

  • Section 13.7 has been modified to remove the reference to "value" of any tangible personal property.
For More Information

The Tax Advisory Services Branch will be issuing a Guide setting out the description and application of the new rules. This Guide will be available on the Ministry of Revenue's website,

You may also contact the ministry toll free at 1 866 ONT-TAXS (1 866 668-8297), Teletypewriter (TTY) 1 800 263-7776 for more information.

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